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Domino's: Raise Dough or Cut Slices

Imagine running a business built on speed, fast pizzas, fast growth, fast profits, and suddenly finding the oven door jammed shut.

After two decades of expansion, Domino's Pizza Enterprises' share price is off by 90% from its peak. Franchisees and shareholders are angry, and the company's debt is now more than its market value.

Founder Don Meij has left the building, cashing out over $160 million along the way. Hungry Jack Cowin is taking personal charge at a Domino's that once promised “hotter, fresher, faster,” but has recently delivered more hot air than results.

Put yourself in Jack's shoes. How do you rebuild the Domino's recipe from here? Do you raise fresh dough to fund a reinvention, or tighten your belt and shrink to survive?

Welcome to this month’s Strategy Standoff.

Background: Hot or Cold Slice

When Domino’s Pizza Enterprises floated on the ASX as DMP in 2005, it was worth $132 million. At its peak, it hit $16 billion and became one of Australia’s great growth stories. They have a really big pizza business in Australia, as you know, but also a lot of stores in Europe and East Asia.

But the ingredients that fed that success - rapid store rollouts, franchisee pressure, and bold growth acquisitions in countries as far apart as France and Japan - have gone stale. Some of the overseas markets turned into anchovies.

And back down under at our Senate enquiry into franchising, Domino’s franchisees told stories of poor margins (and mandatory deep-discount promotions).

The global growth story that once dazzled investors has gone cold. Today, the company’s net debt ($1.9 billion) is more than its market value, which is about $1.3 billion, and the share price has fallen from a 2021 peak of $150 to around $15.

Charismatic CEO Don Meij and his successor have now both left the scene faster than a delivery scooter running nitro.

Enter DMP Chairman, 82-year-old Jack Cowin. He is now Executive Chair, which means he is back working in the business. Now, Cowin knows more about fast food than anyone because he brought Australia KFC and Hungry Jacks. Has he got the way forward?

He told shareholders a story he hopes to see repeated in Australia:

"In 2008, (US version of the business) Domino’s Pizza Inc. traded at just US$3 a share. Today, it’s worth more than US$450+. The road hasn’t always been smooth. But when you back the fundamentals and stay the course, the returns follow."

What will Cowan do? What would you do?

Would you a) cut back to save the core business before the base burns, or b) back yourself in for the big transformation and raise capital in the meantime to keep the global empire alive?

The Strategy Standoff

Strategy A: Downsize to Survive

Jack could sell off underperforming markets (France, Japan) and rebuild trust locally, especially with franchisees.

This would be a simpler business to run, and stop the cash bleed. However, it would be the end of international exposure and the growth opportunity for pizza in these markets. Revenue would also fall.

Strategy B: Raise More Dough

Jack could back the original plan by keeping his empire intact. With new leadership and fresh capital, the ingredients would be there to get back into shape.

This would fund better tech, delivery and franchise systems and buy some time for market recovery and weaning off promotional cycles. However, this would dilute angry shareholders who have already suffered 90% losses.

answer

So, Which Did They Choose?

Cast your vote to find out!

Good job, Strategy A was chosen!

Better luck next time, Strategy A was chosen!

But what did this mean for Domino's...

Outcome: Facilitator Commentary

Matt Braithwaite-Young

Managing Partner

t +61 2 9002 3100

Contact Matt

Domino’s has quietly chosen Strategy A.

Under Cowin’s interim leadership, the company has closed 312 unprofitable stores (222 in Japan alone) and written off $162 million in assets.

Domino’s calls it “a reset.”

Stuffed Crust to Thin

Meij’s expansion era started well but ended up overbaked. Domino’s used optimistic forecasts (18% and 16% growth) to justify goodwill valuations of France and Japan, insisting a turnaround was just around the corner.

Unfortunately, that corner never came.

Now, Domino’s will focus on its home market (ANZ), where competition is fierce and same store sales are down -0.4%. The new goal: rebuild franchisee profitability by going back to basics on normal pizza (they had been off inventing all sorts of things like pizza pots and giant doughnuts) and good-old-fashioned menu simplification.

What if They’d Raised the Dough?

Cowin could have gone for Strategy B, raising capital to fund a fresh round of tech dreams and product innovation. More capital might have bought them time and Cowin would have had a LOT of credibility with large investors -it must have been tempting for him.

But franchisees would have remained disillusioned with a feeling growth of the overall firm was more important than store-by-store profitability. Plus, the board would still be living in the "trust us" promises zone.

By downsizing, Domino’s is at least acknowledging reality, and maybe rediscovering its original recipe: focus, consistency, and a fair slice for the people who actually make the pizzas, the franchisees.

From Hype to Humility

Domino’s rise was the kind of growth story that made fund managers excited. The fast store growth and good signs of consumer support were real. But Dominos looks like a case of bad digestion and is perhaps yet another example of a firm that grew too big, too fast.

Lessons for Leaders

Admit it when your model no longer fits. Fast growth is usually good, but what's the cost?
Protect your core. Whether it’s a home market, a culture, or a loyal partner network, rebuild from the parts that still work.
Don’t confuse confidence with certainty. The same enthusiasm that once inspired early investors can blind leaders to changing realities.

Has Your Strategy Gone Cold? Put it in the Turning Leaf Oven!

If your organisation feels stretched thin, it might be! We've worked with hundreds of firms that find themselves in too many markets, too many categories, and with too little focus - it might be time for some team thinking and alignment on your priorities.

At Turning Leaf, we help you make sure your leadership team steps back, sees your options together, and makes decisions that matter. As you know, that brings accountability and commitment for your team and confidence for you.

When you’re ready, drop me a line at matt@turning-leaf.com.au.

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